Basic Definitions
- Federal Housing Administration (FHA): the largest mortgage insurer in the world. When a borrower defaults on an FHA approved loan, the FHA will repay the lender (e.g. the bank). The FHA was founded in 1934 as part of the New Deal.
- FHA approved loan: a loan in which the borrower meets certain requirements established by the FHA.
- Subprime mortgage: a mortgage given to a borrower who lacks the usual requisite financial resources of people receiving traditional mortgages. Subprime loans are considered higher risk as a result and often come with higher interest rates.
- Securities and Exchange Commission (SEC): a federal financial regulatory agency in charge of monitoring trusts and securities.
- Fannie Mae: the Federal National Mortgage Association. Fannie Mae is a government sponsored mortgage finance lender; it lends money to banks and buys mortgages on the secondary market. It was established during the New Deal.
- Freddie Mac: the Federal Home Loan Mortgage Corporation. Freddie Mac is another government sponsored mortgage finance lender that was established to in the 1970s to give Fannie Mae competition.
- Secondary Mortgage Market: the market in which large mortgage corporations such as Fannie Mae and Freddie Mac purchase already existing mortgages from banks and package them in bundles for sale to investors.
Basic Facts
- Number of Americans who own their own home: 75 million (est.).
- Number of homes that have declined in value over the last 2 years: 59 million (est.).
- Number of Americans who owe more on their mortgage than their home is now worth: 10.7 million.
- Percent of borrowers nationally whose mortgages are “under water” (homes worth less than the mortgage): 23.
- Foreclosures in first quarter of 2010: 930,000.
- Foreclosures expected in 2010: 3 million.
- Percent of national foreclosures accounted for in the six states of California, Florida, Michigan, Illinois, Arizona and Texas: 60%.
- Number of new single family homes expected to have been sold in May 2010: 400,000.
- Number of new single family homes actually sold in May 2010: 300,000.
- Number of new single family homes sold in May 2009: 367,000.
- Percent decrease in new home sales from April to May 2010: 33%.
- Number of existing homes expected to have sold in May 2010: 6.12 million (est.).
- Number of existing homes actually sold in May 2010: 5.66 million (est.).
- Date when government tax credit for home buyers expired: May 1, 2010.
- Number of homes insured by the FHA since its inception in 1934: 34 million.
- Number of homes currently insured by the FHA: 4.8 million.
Fannie Mae and Freddie Mac
- Year Fannie Mae was founded: 1938.
- Year Freddie Mac was founded: 1970.
- Percent of secondary mortgage market controlled by Fannie and Freddie: 90%
- Amount the government has so far spent bailing out Fannie and Freddie: $146 billion (est.).
- Amount the White House has pledged to spend to keep Fannie and Freddie solvent: unlimited.
- Amount the CBO predicts could be spent on Fannie and Freddie before the housing crisis is over: $389 billion.
- Obligations to investors who purchased their mortgage bundles: $3.9 trillion.
